NEPSE directs listed companies to submit details for the purpose of classification; defines framework to be followed

In the first quarter of the current fiscal year, NEPSE had directed listed companies for details on various aspects for the purpose of classification. For this, NEPSE has prescribed the framework of the details, which the companies have to obtain and submit by the end of the month of Ashwin.

NEPSE carries out the classification every quarter as per the international standards on the basis of the listed company’s paid up capital, distributed dividend, description, date of the AGM, published financial statements, credit rating etc. Reviewing the mentioned aspects, NEPSE assigns grades from ‘A’, ‘B’, ‘G’ or ‘Z’ to the respective companies.

If the company has complied with the rules and carried out timely execution of above mention activities, the company is classified as a Class ‘A’ company. If the company has defaulted is these aspects, the class falls accordingly, with Class ‘Z’ as the lowest.

Although, NEPSE claims that the classification of the companies will reflect the risk and help the investors to make informed decisions, not many investors invest on the sole basis of this information. Previously, NEPSE had put many banks and other companies considered to be strong and safe under Class ‘Z’ due to which the purpose of classification seemed irrelevant.